How Weird Is Ron Paul’s Portfolio?
Our recent post on Ron Paul’s personal investment portfolio drew a torrent of comment from readers. In this post, we’ll try to cover the main points they raised.
As a financial journalist (and registered Independent), I don’t take sides in political campaigns. But, in more than 20 years as an investing reporter, I’ve never seen a more unorthodox portfolio than Rep. Paul’s: no bonds at all, no mainstream stocks or mutual funds (other than three funds that “short sell,” or bet against, U.S. stocks), and 64% of all assets in the shares of companies that mine silver and gold.
Its distinctiveness alone makes Rep. Paul’s portfolio worth writing, and reading, about. But his investing approach is also noteworthy for another reason: because it points toward a profound lesson about diversification.
Many of Rep. Paul’s supporters protested, in their comments, that his portfolio has already been vindicated by its performance.
It isn’t that simple.
Congressional financial-disclosure forms report holdings only in wide dollar ranges (for example, $15,001 to $50,000). If Rep. Paul owned gold bullion, estimating his investment performance would be fairly easy. But he doesn’t; he owns gold-mining stocks instead. And since the size of each stock holding is disclosed only within a broad band of valuation, there’s no way an outside observer can derive a long-term rate of return for Rep. Paul’s portfolio (or for any other member of Congress, for that matter). We did ask for comment, but his office didn’t respond. More